Coin for the savvy

Future of Film Summit 2012

With the recession easing but the home entertainment market a fraction of what it once was, financing films remains as challenging as ever. But there are still opportunities for savvy filmmakers in this changing marketplace.

Strategic investors and Asian countries are among those stepping up to the plate with money and incentives, financiers say.

“I think the holes that were left by the Wall Street money exiting the space have been filled to some extent by strategic financiers,” says Matthew Erramouspe, a partner at O’Melveny & Myers’ Century City office who works in the firm’s entertainment, sports and media practice, and a speaker at Variety’s Future of Film Summit today. These include “distributors around the world looking for product to fill their pipeline or vendors who contribute some of their services in-kind,” such as a VFX company cutting its bill in half in exchange for equity in a film.

For some, it’s a case of one door closing and another opening. As studios focus more on event-driven films with built-in awareness, it’s left a void in the market for genre movies, “so independents are able to step in and make a ‘Paranormal Activity’ and go sell the rights internationally,” says Brian Stearns, senior VP and co-head of the Entertainment Industries Group of Bank of America Merrill Lynch.

Sometimes one must look within, as director Steven Soderbergh and star Channing Tatum did when they self-financed the $7 million feature “Magic Mike.”

“They also worked for no money (upfront), so a movie that would’ve been wildly more expensive made at a studio or with an independent financier was actually made for a very reasonable cost,” says Milan Popelka, COO of FilmNation Entertainment.

But most eyes seem to be focused on the East — and China in particular — as both a consumer of content (the continent of Asia holds 60% of the world’s population) and a source of financing.

China only allows 34 foreign films to be imported every year. But if a film qualifies as a Chinese co-production, based on financial and creative participation from the country, it’s not subject to the quota, and its producers receive 43% of the box office take, as opposed to the 25% earned by imported films.

But there are concerns about how much one must self-censor to get that extra yuan, and they’re not just about creative integrity.

“They will tell you that as long as the finished product mirrors or tracks the script that was pre-approved at the beginning, then there won’t be a problem,” Erramouspe says. “But if the picture deviates even a little, theoretically, it could ultimately not be approved” as either a co-production or an import, “with the result being that you don’t get distribution in China, and that can be a disincentive to financiers.”